December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike

December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike, FP Markets

Charts: Trading View

(Italics: previous analysis due to limited price change)


Weekly timeframe:

Since mid-November, buyers and sellers, in the shape of doji indecision candles, have been squaring off around support at $1.1237-1.1281—made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation.  

Any upside derived from current support will likely be capped by resistance at $1.1473-1.1583; navigating lower, on the other hand, throws light on Quasimodo support as far south as $1.0778.

Interestingly, the pair took out 2nd November low (2020) at $1.1603 in late September. This suggests the beginnings of a downtrend on the weekly timeframe, reinforced by the monthly timeframe’s primary downtrend since mid-2008.

Daily timeframe:

December has been quiet thus far and that is unlikely to change until the New Year.

Quasimodo support drawn from mid-June at $1.1213 (positioned beneath the weekly timeframe’s Fibonacci structure) made an entrance on 24th November and remains committed for the time being. A run higher, movement beyond $1.1354ish, casts light on trendline resistance, extended from the high $1.2254. Establishing a decisive close beneath $1.1213, however, exposes support on the daily timeframe at $1.0991 (not visible on the screen).

Regarding the relative strength index (RSI), the value recently recovered from oversold terrain and is on the doorstep of the 50.00 centreline. Overthrowing the latter helps validate interest to the upside, shown through average gains exceeding average losses.

H4 timeframe:

The $1.1235 support has proved itself to be a healthy floor of late, withstanding three downside attempts. The impetus derived from the latest $1.1235 test elevated the currency pair north of Quasimodo resistance from $1.1307, which, as you can see, is serving as support as we write.

Maintaining position from $1.1307 calls on resistance at $1.1379 to potentially make an entrance, a level accompanied by a 38.2% Fibonacci retracement at $1.1381.

A more ‘ambitious’ long play could have price dethrone $1.1379 and connect with a 100% Fibonacci projection at $1.1422, shadowed by Quasimodo support-turned resistance at $1.1438.

H1 timeframe:

A closer reading of price action on the H1 scale has candle movement respecting $1.13 as support, following a one-sided dip from session peaks of $1.1360.

Though price could remain defensive above $1.13 and attempt to re-join yesterday’s session high, technical studies south of the figure shines light on a decision point from $1.1283-1.1291, followed by two prime support areas at $1.1230-1.1244 and $1.1262-1.1274.

$1.1283-1.1291 is likely fragile given its recent test, therefore a $1.13 breach signals a test of either $1.1230-1.1244 or $1.1262-1.1274.

Coming from the relative strength index (RSI), the indicator made contact with overbought status on Thursday and subsequently withdrew to within striking distance of the 50.00 centreline.

Observed Technical Levels:

According to chart studies, two scenarios may unfold:

  • Weekly support at $1.1237-1.1281 holds, daily buyers hold above support at $1.1213 and H4 support continues to call on buying to target H4 resistance at $1.1379.
  • An alternative scene is more short term. H1 price dips below $1.13 and the decision point at $1.1283-1.1291 to connect with prime supports between $1.1230-1.1244 and $1.1262-1.1274 which might encourage a bullish setting.

December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike, FP Markets


Weekly timeframe:

Bulls embraced an offensive phase last week from deep within prime support at $0.6968-0.7242. Although the move snapped a five-week losing streak and emphasised interest within the support, bullish enthusiasm has been muted this week. Nevertheless, buyers extending recovery gains has resistance to target at $0.7501.

Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a gathering of Fibonacci ratios between $0.6687 and $0.6780. Included within this area is a 100% Fibonacci projection: an AB=CD bullish formation.

Trend on the weekly timeframe has been higher since pandemic lows of $0.5506 (March 2020); however, the monthly timeframe has been entrenched within a large-scale downtrend since mid-2011.

Daily timeframe:

Support at $0.7021 put in an appearance in recent trading, bolstered by a 38.2% Fibonacci retracement at $0.7057 (green). Bullish efforts lifted price to Quasimodo support-turned resistance at $0.7221 on Thursday and delivered a notable upper shadow (possible shooting star).

The trend on the daily timeframe has maintained a downside trajectory since late February, therefore the latest pullback might be viewed as a sell-on-rally scenario.

Momentum studies show the relative strength index (RSI) trading within a stone’s throw from the lower side of the 50.00 centreline. Defending the line underlines a bearish environment; a break of the latter signals upside into next week.

H4 timeframe:

Resistance from $0.7213 elbowed into the spotlight on Thursday and has stirred a bearish response. Resistance-turned possible support at $0.7170 is set to receive price, a level which if holds could encourage a bullish move north of $0.7213 towards resistance at $0.7272.

Downstream, additional support is visible at $0.7097.

H1 timeframe:

After a decisive rotation from Quasimodo resistance at $0.7223, price subsequently dropped under $0.72 and is booked to perhaps shake hands with demand coming in from $0.7122-0.7136. Should this come to fruition and the currency pair prints a rebound, prime resistance at $0.7190-0.7179 is an area short-term sellers may be drawn to.

The relative strength index (RSI) is currently testing the 50.00 centreline. Breaking the latter adds weight to a potential move lower on the H1 scale.

Observed Technical Levels:

The daily timeframe’s Quasimodo support-turned resistance at $0.7221 holding ground could hamper bullish efforts out of weekly prime support at $0.6968-0.7242.

Short term, although H4 support at $0.7170 may attract buyers, the H1 suggests the pair is headed lower for a test of demand at $0.7122-0.7136. Given this area is located beneath yesterday’s low at $0.7146, a $0.7122-0.7136 response might occur as longs bid sell-stops under the low.

December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike, FP Markets


Weekly timeframe:

Since the beginning of October, the USD/JPY crossed swords with resistance from ¥114.38 and put in a 4-year pinnacle at ¥115.52. Above current resistance is a 1.272% Fibonacci projection from ¥116.09, while directly below has support in view at ¥112.16.

In terms of trend, the unit has been advancing since the beginning of this year.

Daily timeframe:

Key levels to be mindful of on the daily scale are supply-turned demand at ¥112.66-112.07 and Quasimodo resistance at ¥115.01.

Above ¥115.01 directs flow to another Quasimodo resistance plotted at ¥116.33; below ¥112.66-112.07 shines the technical spotlight to a decision point from ¥111.18-111.79.

RSI (relative strength index) analysis shows the value rebounding from support between 40.00 and 50.00 (indicator support often forms around the 50.00 area amid prolonged uptrends and operates as a ‘temporary’ oversold base).

H4 timeframe:

Leaving resistance at ¥114.46 and neighbouring 61.8% Fibonacci retracement from ¥114.38 unchallenged, Thursday witnessed aggressive selling that pierced local trendline support, taken from the low ¥112.56. Support is seen at ¥113.22 (last Friday’s low), with subsequent selling pointing the technical radar to support coming in at ¥112.73.

H1 timeframe:

Price nudged back under ¥114 on Thursday, placing Quasimodo support at ¥113.33 in sight. Lower than here, we see limited support until around the ¥113ish neighbourhood.

The relative strength index (RSI) is within striking distance of oversold territory after smashing through the 50.00 centreline.

Observed Technical Levels:

The break of local trendline support on the H4, taken from the low ¥112.56, echoes a bearish setting to H4 support around ¥113.22. With this being the case, further selling beneath ¥114 is possible, targeting H1 Quasimodo support from ¥113.33 and then ¥113.

December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike, FP Markets


Weekly timeframe:

Despite the bid so far this week, the weekly timeframe’s technical picture remains unchanged.

Supply-turned demand at $1.3629-1.3456 recently surrendered position.

Couple this with price closing under a double-top pattern’s ($1.4241) neckline at $1.3669 in August, and the monthly timeframe trading lower since late December 2007, the weekly chart reflects a bearish technical outlook. The double-top pattern’s profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the breakout point—delivers a downside target around $1.3093.

Daily timeframe:

Despite a bullish showing Thursday, the technical landscape on the daily timeframe remains unchanged.

Quasimodo support at $1.3119 is firmly in the headlights on this timeframe. Resistance remains at $1.3602, plotted nearby trendline resistance, taken from the high $1.4250—both forming clear upside objectives should buyers extend Thursday’s push.

Longer-term sentiment has remained biased to the downside since June. This has caused the relative strength index (RSI) to form indicator resistance between 60.00 and 50.00 (common in downtrends), with the value close by as we write.

H4 timeframe:

Resistance from $1.3275 gave way Thursday and touched gloves with resistance drawn from $1.3353. This follows a trendline resistance breach, extended from the high $1.3815.

North of $1.3353, technical eyes will be drawn to a decision point at $1.3450-1.3427.

H1 timeframe:

Resistance entered the show at $1.3365 yesterday and pulled price movement to within close range of $1.33. Under the psychological level, support appears thin until trendline support, drawn from the low $1.3160, and then $1.32.

The relative strength index (RSI) pushed out of overbought space on Thursday and is now tackling the 60.00ish range.

Observed Technical Levels:                     

Technically, this remains a bearish market despite the BoE hiking rates. Therefore, H1 price closing under $1.33 could tempt an extension of Thursday’s slide towards H1 trendline support, taken from the low $1.3160. This is reinforced by the H4 timeframe testing resistance at $1.3353 and the higher timeframes pointing to lower levels.

December 17th 2021: Technical Studies Show Potential GBP/USD Weakness Despite Rate Hike, FP Markets


The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

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